Task force report puts ‘material risks’ of climate change in focus

Former New York City Mayor Michael Bloomberg addresses the United States Conference of Mayors at the Fountainebleau Hotel on June 26, 2017 in Miami Beach, Florida. On Thursday, the Task Force on Climate-related Financial Disclosure (TCFD), led by Mr. Bloomberg, releases its final report that includes a series of recommendations aimed at providing capital markets with clearer information on risks and opportunities as the world transitions to a lower-carbon economy.

Momentum is growing for energy companies and other corporations to formally and clearly spell out the risks that climate change poses to the value of their assets and their future profitability, even as the Trump administration seeks to play down the threat.

On Thursday, the Task Force on Climate-related Financial Disclosure (TCFD), led by former New York City mayor Michael Bloomberg, releases its final report that includes a series of recommendations aimed at providing capital markets with clearer information on risks and opportunities as the world transitions to a lower-carbon economy.

The TCFD report will be presented by Bank of England Governor Mark Carney at next week's Group of 20 leaders summit in Hamburg, Germany, and proposes a voluntary approach that would expand on the existing requirements for companies to report "material risks" in their securities filings.

U.S. President Donald Trump has questioned the science of climate change, and is rolling back policies aimed at driving down greenhouse gas emissions in the United States, even as he promotes greater production and use of fossil fuels, such as coal, oil and natural gas. He is unlikely to support the G20's endorsement of the task force's recommendations, although it has the backing of many U.S.-based pension funds, rating agencies and corporations.

The Bloomberg report comes as institutional investors are demanding more climate-related disclosure from companies, especially from oil companies and other energy-intensive industries. Canadian securities regulators are reviewing what – if any – additional mandatory climate-risk reporting should be imposed.

"Warming of the planet caused by greenhouse gas emissions poses serious risks to the global economy and will have an impact across many economic sectors," Mr. Bloomberg said to Mr. Carney in a letter that introduced the report. "It is difficult for investors to know which companies are most at risk from climate change, which are best prepared, and which are taking action."

He said adoption of the task force's recommendations will ensure that the effects of climate change will be "routinely considered" as investors decide where to allocate capital and how to mitigate risk. And he stressed the impacts will include opportunities for new emerging technologies, as well as business risks.

The task force – comprising 21 top corporate and financial industry executives – recommends that companies report on four key areas: the degree to which their boards are engaged in the discussion of climate change; what strategies companies are employing to minimize threats and seize on opportunities; how they assess risk, and what targets and metrics they are adopting to manage climate-related issues.

It said four industrial sectors are particularly vulnerable to risks: energy, transportation, building and materials, and agriculture and forest products. Companies in those sector are urged to assess the likely impact to their businesses from policies aimed at limiting the increase in global temperatures to 2C above pre-industrial levels.

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Many of those companies already participate in the Carbon Disclosure Project (CDP), including some of Canada's largest energy firms such as Suncor Energy Inc., Cenovus Energy Inc., Encana Corp., and TransAlta Corp. CDP's director of engagement, Jane Stevensen, said her group will adopt the Bloomberg task force recommendations to provide more complete and comparable disclosure.

Several Canadian pension funds provided statements of support for the recommendations, including the Ontario Teachers' Pension Fund, the Caisse de depot et placement du Quebec and the Canada Pension Plan Investment Board, which was represented on the task force.

Investors will be pressuring companies to adopt the TCFD framework, Jane Ambachtsheer, a partner at Mercer Group and task force member, said in an interview Wednesday.

The report will provide "a push to cast more light on the fact that climate-related risks and opportunities can be material, and increasingly will be material and therefore people should be be treating them in that way," Ms. Ambachtsheer said. "This is making it clear and comparable – that is what the investment community wants."

The Canadian government is "supportive" of the task force's work, said Chloe Luciani-Girouard, spokeswoman for Finance Minister Bill Morneau. She noted that Canadian securities regulators are reviewing climate-change disclosure, including the Bloomberg report's recommendations.

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